Journal Issue: World Bank Economic Review, Volume 34, Issue 1
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Volume
34
Number
1
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Journal ISSN
1564-698X
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World Bank Economic Review
1564-698X
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Articles
Does E-Government Improve Government Capacity? Evidence from Tax Compliance Costs, Tax Revenue, and Public Procurement Competitiveness
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Kochanova, Anna; Hasnain, Zahid; Larson, Bradley
Using cross-country data on e-government systems, this paper analyzes whether e-filing of taxes and e-procurement implementation improves the capacity of governments to raise and spend fiscal resources through lowering tax compliance costs, improving tax collection and public procurement competitiveness, and reducing corruption. Adopting e-filing systems reduces tax compliance costs as measured by the time to prepare and pay taxes, the likelihood and frequency of firms being visited by a tax official, and the perception of tax administration as an obstacle to firms’ operation and growth. E-filing is also associated with a moderate increase in the income tax revenue to GDP ratio. The results for e-procurement are weaker, with the number of firms securing or attempting to secure a government contract increasing only in countries with higher levels of development and better institutions. There is no strong relationship between e-government and corruption.
Do Poor Countries Really Need More IT?
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Gaggl, Paul; Eden, Maya
Productivity differences across countries are often attributed to differences in technological capabilities. This paper asks whether there are systematic cross-country differences in the adoption of information technologies (IT). We document a positive correlation between IT use and income, which weakens over time. However, given that IT use is an endogenous outcome of both technological capabilities and the abundance of complementary factors of production, it tends to over-state the degree of cross-country differences in technology. We propose two novel calibration approaches to address this problem. After accounting for endogenous differences in industrial composition, we find that there is no systematic relationship between income and IT capabilities.
The Origins and Dynamics of Export Superstars
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Freund, Caroline; Pierola, Martha Denisse
Export superstars are important for export growth and diversification and are typically born large. Firm-level data on manufacturing trade from 32 developing countries show that the top five exporters account for on average nearly one-third of exports, 47 percent of export growth, and a third of the growth due to export diversification over a five-year period. Within countries and industries, export growth is positively correlated with the share of exports in the top five firms. Most of the top five exporters were already large five (or eight) years ago or are new firms; it is rare for these export superstars to emerge from the bottom half of the distribution of firm sizes. For countries where detailed data exist, superstars are producers, not traders, and are primarily foreign owned.
Taxing the Good? Distortions, Misallocation, and Productivity in Sub-Saharan Africa
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Fattal-Jaef, Roberto; Cirera, Xavier; Maemir, Hibret
This paper uses comprehensive and comparable firm-level manufacturing censuses from four Sub-Saharan African (SSA) countries to examine the extent, costs, and nature of within-industry resource misallocation between heterogeneous production units. This paper finds evidence of severe misallocation in which resources are diverted away from high-productivity firms towards low-productivity ones, although the magnitude differs across countries. Estimated aggregate productivity gains from the hypothetical equalization of marginal returns range from 30 percent in Côte d’Ivoire to 160 percent in Kenya. The magnitude of reallocation gains appears considerably lower when performing the same counterfactual exercise based on the World Bank Enterprise Surveys once the value-added shares of industries are adjusted using the census data. This suggests that linking firm-level survey data to aggregate outcomes requires census-type data or sampling methods that take the true structure of production into account.
The Global Trade Slowdown
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Constantinescu, Cristina; Ruta, Michele; Mattoo, Aaditya
This paper focuses on the sluggish growth of world trade relative to income growth in recent years. We use a simple empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s, even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow GDP growth, but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that a key driver of structural change over the 2000s is the slowing pace of international vertical specialization, which accounts for between one-quarter and one-half of the decline in import growth from the 1990s to the 2000s.
Get Rich or Die Tryin’
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Shrestha, Maheshwor
This article reports on a randomized field experiment in which potential work migrants from Nepal to Malaysia and the Persian Gulf countries are provided with information on wages and mortality incidences at their intended destinations. It is found that, particularly for the group of potential migrants without prior foreign migration experience, the information changes their expectations of earnings and mortality risks abroad, which further changes their actual migration decisions. Using the exogenous variation in expectations, it is estimated that the elasticity of migration with respect to mortality rate expectation is 0.8, and the elasticity of migration with respect to earnings expectation is 1.1.
The Spillovers of Employment Guarantee Programs on Child Labor and Education
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Li, Tianshu; Sekhri, Sheetal
Many developing countries use employment guarantee programs to combat poverty. This study examines the consequences of such employment guarantee programs for the human capital accumulation of children. It exploits the phased roll-out of India’s flagship Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) to study the effects on enrollment in schools and child labor. Introduction of MGNREGA results in lower relative school enrollment in treated districts. It also finds that the drop in enrollment is driven by primary school children. Children in higher grades are just as likely to attend school under MGNREGA, but their school performance deteriorates. Using nationally representative employment data, the study finds evidence indicating an increase in child labor highlighting the unintentional perverse effects of the employment guarantee schemes for human capital.
Urbanization and Child Nutritional Outcomes
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Amare, Mulubrhan; Arndt, Channing; Abay, Kibrom A.; Benson, Todd
The implications of urbanization on child nutritional outcomes are investigated using satellite-based nighttime light intensity data as a marker of urbanization with data from two rounds of the Nigeria Demographic and Health Survey. Nighttime light introduces a gradient of urbanization permitting investigation of the implications of urbanization on child nutritional outcomes along an urbanization continuum. Nightlight is found to significantly predict child nutritional outcomes even after controlling for observable covariates known to influence child nutrition. In all specifications, improvements in child nutrition outcomes onset with relatively low levels of light emissions and continue rapidly as nightlight intensity increases before largely leveling off. These nonlinear relationships highlight the value of nightlight as a population agglomeration indicator relative to traditional binary rural-urban indicators. Consistent with other recent work, patterns of urbanization influence welfare outcomes. At least for Nigeria, a pattern that extends the benefits of urban agglomeration to larger shares of the population would speed improvements to child nutritional outcomes.
The Geography of NGO Activism against Multinational Corporations
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Hatte, Sophie; Koenig, Pamina
To what extent do Non-Governmental Organizations (NGOs) monitor global value chains? While NGOs regularly denounce the behavior of multinational corporations throughout the world, their motivations for choosing campaign targets remain largely unknown. Using a new dataset on activists’ campaigns toward multinational firms, we estimate a triadic gravity equation for campaigns, involving the NGO, firm, and action countries. Our results point to a strong proximity bias in NGO activity: Distance, national borders, and lack of a common language all contribute to impede the intensity of campaigns. We estimate the distance elasticity of campaigns to be −0.2 and further document that NGOs strongly bias their actions toward home firms or foreign firms with home actions. A domestic firm is 3.45 times more likely to be attacked than a foreign one. Foreign firms headquartered in common language countries draw 1.63 times more campaigns. Overall, campaigns seem to be designed so as to include at least one element of proximity drawing the attention of consumers. This pattern questions the role of NGOs in the monitoring of multinational production operated in remote, unfamiliar locations.
Early Rainfall Shocks and Later-Life Outcomes
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Carrillo, Bladimir
This paper uses birth cohorts spanning several hundred locations over 40 years to examine the long-term consequences of in utero exposure to abnormal rainfall events in Colombia. The identification strategy exploits exogenous variation in extreme droughts or floods experienced by individuals while in utero in their birth location. The results indicate that individuals prenatally exposed to adverse rainfall shocks are more likely to report serious mental illness, have fewer years of schooling, display increased rates of illiteracy, and are less likely to work. These results are larger in magnitude for individuals born in areas with a higher risk of malaria, which is consistent with the notion that exposure to infectious and parasitic diseases may play an important role.
The Impact of Positive Agricultural Income Shocks on Rural Chinese Households
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Leight, Jessica
In the post-collectivization period, rural Chinese households were required to sell part of their grain output to the state at a below-market price; however, increases in this quota price beginning in 1993 generated substantial positive income shocks. These income shocks also varied cross-sectionally in accordance with crop composition given that quotas were systematically larger for rice-producing households, generating a quasi-random source of variation in the size of the shock driven by climatic variation in suitability for rice cultivation. Households induced to experience relatively larger income shocks show evidence of decreased agricultural investment, increased investment in non-agricultural businesses, and increased migration as households gain increased income, consistent with the hypothesis that credit constraints may have constrained some households from entering non-agricultural production ex ante. In addition, there is evidence that these households were concentrated among households who had not previously diversified out of agriculture.
Development and the Labor Share
(Published by Oxford University Press on behalf of the World Bank, 2020-02) Maarek, Paul; Orgiazzi, Elsa
A U-shaped relationship between development and the labor share of income is brought to light. To do so, a panel dataset on the labor share in the manufacturing sector of developing countries is exploited. This dataset has greater coverage than the ones of previous studies focusing on developing countries. These data are also available at the disaggregated level for 28 manufacturing subsectors. This allows us to show that the U-shaped pattern of the labor share is also observed at the subsector level, suggesting that it does not correspond to reallocation forces across manufacturing subsectors during the development process. Standard theories of development economics that feature duality in the labor market easily generate such a pattern.